Chief Analyst at Danske Bank Arne Rasmussen sees the possibility that the cross could inch higher in light of the expected poor GDP figures in the Norwegian economy to be published later. Key Quotes “EUR/NOK remains highly driven by global risk sentiment, well illustrated by the statistic that the cross and the VIX – also known as the ‘index of fear’ – this year on average have moved in the same direction on nine out of 10 days”. “The reasons for this lie both in the EUR’s status as a preferred funding currency and in global growth worries being an important driver of the oil price”. “When risk sentiment has tumbled this year the EUR has strengthened, while oil prices have weighed on the NOK. Both have contributed in sending EUR/NOK higher”. “Indeed, a breakdown of the 2Y EUR-NOK swap spread shows that while 2Y NOK Swap rates have been relatively stable, the ECB repricing would itself warrant a lower EUR/NOK”. “However, this effect has been dominated by the former ‘risk channel’. While risk appetite has stabilized over the past few days, we remain cautious on risk assets in the very near term”. “Consequently, with our expectations for Norwegian GDP to disappoint today, there could well be an opportunity to go against the past few days’ move lower in EUR/NOK”. For more information, read our latest forex news.